U.S. investment bank Morgan Stanley's decision to reduce its exposure to global equities due to misgivings about the ability of policy easing to offset weaker economic data also weighed on investor sentiment.
Stocks around the world fell on Monday after strong U.S. job gains tempered expectations the Federal Reserve will deliver a large interest rate cut.
On Wall Street, U.S. equities continued their slide from Friday as hopes of a steep Fed rate cut faded. They were also weighed by losses in shares of Apple Inc, following an analyst downgrade, and Boeing Co,
after a Saudi Arabian airline said it would not proceed with an order for its jets.
European stocks edged lower, with the STOXX down 0.1%, as Deutsche Bank’s announcement that it would cut 18,000 jobs around the world in a restructuring plan dragged down bank shares.
MSCI’s gauge of emerging market equities fell 1.2% as Asian shares closed lower and the dollar edged up in reaction to dampened expectations for a sharp Fed rate cut.
U.S. investment bank Morgan Stanley’s decision to reduce its exposure to global equities due to misgivings about the ability of policy easing to offset weaker economic data also weighed on investor sentiment.
Yet U.S. Treasury debt yields fell, retreating from their gains on Friday in response to U.S. employment data.
“There’s a growing skepticism about the Fed’s need to lower rates. But the bond market is up again, which means yields are down, which would contradict that,” said Tim Ghriskey, chief investment strategist at
Inverness Counsel in New York.
“Certainly, if the (U.S.-China) trade issue is prolonged, we should continue to see economic weakness in the U.S., and that’s encouraging the bond market to forecast more rate cuts.”
The Dow Jones Industrial Average fell 123.53 points, or 0.46%, to 26,798.59, the S&P 500 lost 15.1 points, or 0.50%, to 2,975.31 and the Nasdaq Composite dropped 66.89 points, or 0.82%, to 8,094.91.
Benchmark 10-year U.S. Treasury notes last rose 6/32 in price to yield 2.0251%, from 2.044% late on Friday.
CURRENCIES AND GEOPOLITICS
In currency markets, the Turkish lira weakened 1.7% against the dollar after President Tayyip Erdogan dismissed central bank governor Murat Cetinkaya, whose four-year term was due to run until 2020, and replaced him with his deputy Murat Uysal.
Erdogan sacked Cetinkaya for refusing the government’s repeated demands for interest rate cuts, laying bare differences over the timing of cuts to revive the recession-hit economy.
The dollar index rose 0.07%, while the euro dropped 0.10% against the greenback to $1.1213.
After hitting a six-month low to the dollar on Friday as a result of poor economic data and a rise in expectations that the Bank of England will cut interest rates, the British pound edged down 0.12% to $1.2508.
Geopolitics were also in focus in commodity markets following news on Sunday that Iran will boost its uranium enrichment in breach of a cap set by a landmark 2015 nuclear deal.
U.S. crude rose 0.73% to $57.93 per barrel and Brent crude gained 0.4% to $64.49 per barrel.